VAT change plans alarm building firms

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BUILDING trade representatives have renewed calls for the Government to scrap proposed changes to the Value Added Tax system that they warn could put huge strain on the finances of small and medium sized enterprises.

The Federation of Master Builders said the introduction of reverse charge VAT from March 1 amid the challenges posed by the coronavirus crisis will impact on the cash flows of businesses at the worst possible time.

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The change will result in firms that are at the top of the supply chain accounting for the VAT that is chargeable on the goods and services they receive, rather than paying it over to the suppliers concerned.

Brian Berry, Chief Executive of the Federation of Master Builders, said of the proposed change: “By removing the flow of VAT money between businesses in the construction supply chain, four in 10 builders say this will have a ‘significant or moderate’ impact on their cashflow.”

Mr Berry also warned that the introduction of reverse charge VAT would increase red tape and the associated compliance costs.

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The Government plans to introduce the reverse charge system to help reduce fraud. Kirsten Oswald, Scottish National Party MP for East Renfrewshire, has submitted a motion to Parliament calling on the Government to rethink the move.

She said the introduction of the reverse charge system could have a devastating impact on the cash flows of SMEs in the construction industry.

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